18 Oct
Knowledge, Knowledge of warrants, Warrants

Benefits and risks of trading Covered Warrants (CW)

BENEFITS

  1. Cost-Effective Investment: Covered Warrants (CW) are often priced much lower than the underlying security.
  2. High Profitability: The ceiling margin can reach up to 100-200% per day, enabling rapid and potentially high profitability.
  3. Inclusive for Foreign Investors
  4. Zero deposit requirement, unlike derivative securities
  5. Trading as simple as the underlying stock

RISKS

  1. Significant Leverage: The substantial ceiling fluctuation range of up to 100-200% enables high leverage, though the maximum loss is limited to the amount spent on purchasing CW.
  2. In the event of losses or break-even at maturity, the cost of purchasing covered warrants is forfeited.
  3. Limited Lifespan: Covered warrants have a duration of 3 to 24 months, potentially making them less appealing for many medium and long-term investors compared to underlying securities.
  4. There is a risk of issuer insolvency
Total 0 Votes
0%

Bạn muốn góp ý về bài viết?

+ = Verify Human or Spambot ?

Tìm kiếm
Có thể bạn quan tâm
Câu hỏi thường gặp

c Expand All C Collapse All
a

How do I place an order to buy and sell warrants?

You can place an order in the “Trading stocks” section on TCInvest, similar to how you do it for underlying securities.
a

What is the duration of warrants?

The duration of warrants is a minimum of 3 months and a maximum of 2 years, calculated from the offering date to the expiration date.
a

What happens when selling a warrant before expiration?

When selling warrants (CW) before expiration, the trading method/ fees/ taxes are similar to those of underlying securities, although margin trading is not allowed.
Please note:
Net profit = (Selling CW Price – Buying Price) x Number of CW
Fees and taxes are calculated based on the transaction value = Matched CW Price x Number of CW.
a

What happens to warrant at expiration?

If investors hold warrants until expiry:

  • Loss: Investors receive nothing.
  • Break-even: Investors receive nothing.
  • Profit: The investor:
    Receives the price difference on T+5 = (Settlement Price – Exercise Price) x (Number of CW/Conversion Ratio)
    Pays a tax = 0.1% x Settlement Price x (Number of CW/Conversion Ratio)

Tags :